Lots of upbeat news today. Recession flattening out. Recovery predicted for second half of 2013. Orders up. Jobs being lost at a lower rate. Will this turn out to be the triumph for austerity the Germans unswervingly insist upon? You might think so from today’s data. But an upswing in Europe is dependent on strong growth in the rest of the global economy, as Larry Elliott points out.
However, all this renewed optimism generated by these figures fails to take into account two very important factors (at least two). The first being that for the global economy to achieve strong growth, high levels of consumption have to be restored to Europe. If Europe fails to restore a good level of consumption, global growth will be sluggish and anaemic. But such a condition simply horrifies German policy makers. For them austerity uber alles. And may the rest of the world be damned.
The other factor is the underlying cause of all the Euro misery which no one but no one addresses. At least none of those supposedly trying to solve the crisis. And that is the inherent imbalances of the Euro. The abysmal design of the common currency that has led to the surpluses in the north and the deficits in the south.
What is more, countries struggling like Greece, the worse hit by the crisis, do not have a hope in hell of ever recovering with a strong currency like the Euro. The very efforts to “reform” and restore fiscal rectitude and all that under such conditions merely leads to growing unemployment, shrinking revenues hence more taxation and cuts and eventually a total collapse (which we are already dangerously near).
Nevertheless, as Yannis Varoufakis rightly points out, a Greek exit from the Euro at this point would lead to a horrific situation where there would be a mass bank run throughout the Mediterranean at least and beyond and a painful, disorderly collapse of the whole unsustainable system.
But who is going to address these root causes of the crisis? Who is even going to officially recognise the truth? The Commission with the disastrous Olli Rehn as head of economic affairs? The German government, now openly and unashamedly running the show? The French, who as is their wont, care only about making a show of being an equal to Germany, which they never really are?
This is an impasse. A dangerous impasse. And one that could even make the current capitalist global economy collapse if serious people don’t get round to seriously addressing the serious problems the Eurozone suffers from. For the moment from Barrosos, Olli Reh, Schauble, Merkel, to Samaras and Stournaras, with a great many others in between, we only have clowns. And ones that don’t even make us laugh.